Between 1971 and 1974, the Consumer Price Index went from 40.5 to 49.3.
Cumulatively, prices increased 21.7%, which works out to an average of
6.77% per year. Put differently, a dollar in 1971 bought what
$0.82 buys in 1974.
Consumer prices rose 4.4% in 1971, down from 1970’s 5.7% as
the recession that started in December 1969 finally cooled demand. The bigger
economic story came that August 15, when President Nixon closed the “gold
window” that let foreign governments exchange dollars for gold, ending the
Bretton Woods system that had anchored the dollar since World War II. The
same address announced a 90-day freeze on wages and prices, the first
peacetime controls the country had seen, an attempt to break inflationary
expectations without the slower grind of tighter money. The “Nixon Shock,” as
it came to be known, let the dollar float against other currencies for the
first time and set the stage for a wage-and-price-control regime that would
run in various forms into 1973. Politically, the country lowered its voting
age that year: the 26th Amendment, ratified July 1, extended the vote to
18-year-olds, capping a campaign built on the argument that men old enough to
be drafted to Vietnam were old enough to vote for the people who sent them.
The Postal Service, independent since 1970’s reorganization, raised
first-class postage from 6 to 8 cents that May. A median household earned
$9,028 in 1971, up from $8,734 the year before, while gas held near 36 cents
a gallon and a new home sold for a median $25,200. Consumer prices stood
309.1% above their 1913 level by year’s end, still years away
from the double-digit inflation the controls were meant to prevent.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1971 spending costs in 1974, by category:
Category
Avg. yearly inflation
$100 in 1971 →
All items (CPI-U)
6.77%
$122
Energy
12.87%
$144
Food
10.90%
$136
Housing
6.42%
$121
Medical care
5.51%
$117
Transportation
5.06%
$116
Core (all items less food & energy)
4.98%
$116
Apparel
4.34%
$114
Not shown because the BLS began these indexes after 1971: recreation (1993–), education & communication (1993–).
1974 was the year the postwar economy broke its old rules. Consumer prices
rose 11.0%, the fastest annual increase since 1947, as the Arab oil embargo
that ran from October 1973 to March 1974 roughly quadrupled the price of
crude oil worldwide. Gasoline, which had averaged 38.5 cents a gallon in
1973, jumped to 53.2 cents, and shortages forced many states into odd-even
rationing at the pump. Nixon’s wage and price controls, in place in some form
since 1971, expired at the end of April, removing the last brake on prices
just as the oil shock hit. Nixon himself resigned in August over Watergate,
and Gerald Ford’s response to inflation, a voluntary “Whip Inflation Now”
campaign built around lapel buttons, became a symbol of how little
conventional politics could do against the problem. Prices kept climbing even
as the economy weakened: a recession that started in November 1973 dragged
on, the Dow fell to a bear-market bottom of 577.60 in December, and
unemployment was already rising toward the 9% it would reach in 1975. The
combination of rising prices and a shrinking economy gave the decade its
name: stagflation.
MLA: “Inflation from 1971 to 1974: $100 is worth $122 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1971-to-1974/
APA: InflationCalculator.com. Inflation from 1971 to 1974. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1971-to-1974/